Describe the major challenges facing the food industry, technological innovation trends and changes in regulatory policies.

Editor’s note: This article comes from the WeChat public account “35 bucket” (ID: vcearth), author Xing Bairu. The original title was “Announced by UBS Group: Five Future Trends in the Food Industry and Key Challenges We Are Facing”.

Editor’s note:

This article is part of the “Future of the Food Industry” report released by UBS GWM Investment Research, which details the main challenges facing the food industry, technological innovation trends and regulatory policies. Variety.

UBS is a global wealth management and financial services company with more than 60,000 employees and operations in more than 50 countries around the world. In 2019, it ranked 274th in the Fortune Global 500, with operating income of 42.96 billion U.S. dollars and total assets of 958.4889 billion U.S. dollars.

The following is an excerpt from the report on the future trends of the food industry:

Trend One: Scarcity Political economy in the nature

Everyone knows the structure of the world ’s future population: by 2050, there will be about 2 billion new people in the world. During this period, global food demand is expected to increase About 60% (United Nations, 2019). Whether from Eastern or Western countries, whether developed or developing, food security issues will be a huge problem.

The population growth rate in Asia and Africa will exceed the world population growth rate, which will also double the pressure on local food security. As far as Africa is concerned, by 2050, an additional 1 billion people will grow, and the urbanization process in Asia will accelerate (by 2030, Asia will have nearly half of the world’s urban residents). The United Nations predicts that by mid-century, urban residents in Asia and Africa will increase by 2.5 billion.

As the country ’s urbanization develops and food production changes, the issue of urban and rural resource allocation will become more complicated and politicized. For example, water shortage As the interests of more and more countries diverge, they will gradually become a key issue. The land issue will also affect the food trade and value chain to a certain extent. The backward infrastructure in developing countries makes domestic food production difficult to meet the increasing domestic demand. Increased demand, if imported food can be cheaper and higher quality, urban middle-class people may prefer imported food.

Whether food is self-sufficient or not is still the standard that defines food security, but now we will pay more attention to several indicators of food elasticity, diversity and affordability. In Asia, growing food demand has made it difficult for most countries to remain self-sufficient, especially China. In addition, more serious resource shortages have increased the demand for water and land exchange-an open and effective global food supply chain. As trade threats intensify, the trade agreements between the alliances and the countries in the region become more and more important. Because of the risk of imbalance between supply and demand, international food trade has become more complicated.

For the food industry that depends on trade, the tariff war is undoubtedly a poison. As tensions between the United States and many countries or regions, including China, Canada, Mexico and the European Union, have escalated, tariff barriers between countries have prevailed, which has changed the historic agricultural trade routes.

For example, China began importing soybeans and pork from Brazil and beef and cotton from Australia, but the suppliers of these agricultural products used to be the United States. It is foreseeable that the interruption of the agricultural trade chain will lead to a reduction in the benefits of global trade in food.

Although the result of this dispute is still confusing, what is certain is that the local government will invest more energy in the national food security strategy and promulgate more policies to determine the trend of food production and supply chain in the next 10 years or so . The scale and structure of strategic food stocks will be presented in a clear and clear way.

For example, China ’s strategic corn reserves exceed seven months of consumption. In addition, local food production levels and subsidies and land acquisition strategies are also promulgated. Similar to the transaction data, China and Saudi Arabia have made large-scale farmland acquisitions in Australia and other countries in recent years.

Intellectual property rights are part of the cause of trade disputes between China and the United States. Specifically, the imperfect technology sharing system and lack of information collection and processing personnel training system construction are the main constraints to food security, especially in developing countries. For today’s food industry, information sharing, technological innovation and international cooperation are more important than any other industry.

Key insight: United Nations forecasts,In the next 30 years, the global population will grow from less than 8 billion today to about 10 billion. In the next 10 years or so, about 1 billion people will enter the livelihood.

1. Put an end to poverty. About three-quarters of the extremely poor people live in rural areas, and most of them rely on agriculture to guarantee their food, clothing, housing and transportation. An inclusive agricultural sector can create more jobs in rural areas and eliminate hunger.

2. Organizations with peace, justice and strong execution. Food security and a functioning agricultural sector can play a key role in preventing conflict, migrating poor people, and building peace.

Trend 2: New Age Consumers

What kind of consumers will appear in the middle of this century? What will they buy? How to consume? These questions will be answered from three groups of different age groups-New Asian urban residents, the aging generation X (late 1960s-mid 1970s) and the millennial generation (reaching adult age after 00 years) . All in all, from now on, consumers will become a highly interconnected group, they can immediately get the latest solutions through various digital platforms. Consumers want to fill their stomachs instead of (excessive) urbanization-technological innovation will be used more to fill this gap.

If all goes well, more food supply from urbanization, income growth, and trade will expand people ’s diet, especially in high-value food categories. But at the same time, as consumers are more inclined to choose higher energy density diets, current resources will become increasingly tight: people tend to consume more grains indirectly through meat.

Although it cannot be generalized, protein consumption trends are closely related to factors such as religious beliefs, customs and / or a strong vegetarian culture (such as India). However, in general, as in Western countries, if there is no adequate blocking mechanism, Asia may further shift to the double burden of malnutrition and obesity in the future.

Key insight: According to Deloitte data, by 2020, millennials will account for 40% of all consumers, affecting annual sales of approximately $ 40 billion.

In addition, changes in the demographic structure have also disrupted the way food is consumed in the future; for traditional food companies, designing products that cater to consumer groups of different ages means half the battle. Whether it is a digital platform designed to provide millennials with timely products and services (such as food delivery apps), or a solution that specifically addresses the problem of an aging population (such as vitamin supplements and health services), every market segment needs Carefully plan and implement the special consumer docking work.

Millennial consumers are using digital solutions to find the products and services they want, such as applications such as GrubHub, Deliveroo, and Uber Eats, not limited to physical options nearby. According to a recent McKinsey study, consumers under the age of 35 are different from their predecessors, and different life backgrounds determine that the popular brands and traditional distribution channels are not suitable for them. They often prefer new brands, especially in food. An example is the increasingly popular “Beyond Meat” and “Impossible Burger” (both companies are well-known plant-based food manufacturers). In fact, according to KPMG research in 2019, millennials are almost four times as likely to avoid buying multinational food company products as baby boomers.

As part of this transformation, this group (millennials) are increasingly inclined to “mindful diets”-that is, to choose brands and food from sustainable sources-and to participate consciously in the food industry, as well as food Production and consumption. According to Deloitte data, by 2020, millennials will account for 40% of all consumers, affecting annual sales of approximately $ 40 billion.

Aging population is also a supply factor (not only in developed countries). Urbanization and aging have a serious impact on the composition of rural labor, the mode of agricultural production, the social cohesion and property rights of rural communities. Of the 570 million farms in the world, only 4% are in high-income countries and 49% are in low-income countries (FAO, 2017).

3. Reducing waste emissions is a global challenge. The UN estimates that 1.3 billion tons of food are wasted each year, equivalent to one-third of global food production.

Trend 3: Health and Wellness

According to KPMG accounting firm, the value of the health food industry has reached 767 billion US dollars, accounting for about 30% of the global packaged food market share. For many years, consumers have stated that they want to enjoy more healthy food and have a healthier lifestyle, but their daily behavior has not changed-until now. The World Health Organization (WHO) estimates that if the main risk factors for noncommunicable diseases are eliminated, such as an unhealthy diet, about 80% of premature heart disease cases, the incidence of stroke and type 2 diabetes and 40% of cancers can be avoided .

The impact of high-fat foods is huge-the World Obesity Federation (WOF) estimates that the direct medical cost of (obese) alone is as high as $ 850 billion. In OECD countries, one in five adults and one in six children are obese. Without immediate action, the medical bill to treat obesity-related health complications is expected to climb to US $ 1.2 trillion in 2025 (WOF, 2018). When consumers redefine the meaning of a healthy diet, prevention is the focus: more natural, green, organic products and / or foods that do not contain sugar, gluten, pesticides and other additives. In addition, highly personalized health needs, the use of fitness trackers and other health care related programs are rapidly spreading. In fact, personal dietary habits and changes in nutritional needs are making nutritional personalization trends more pronounced.

Similarly, policy makers are paying more and more attention to the close connection between diet (and environment) and health. We have heard that policy makers are reviewing dietary guidelines, and the international medical community is working to reduce the use of red meat and promote the increase of plant protein in the social diet. Foods that specifically address personal health problems—such as foods with anti-inflammatory properties or nutrients that support immune function, and foods that improve overall gut health—are also rapidly gaining popularity. According to the World Health Organization, dietary diversity is another driving force for health. This is the main argument of the producers, who are restoring these traditions, but forgotten the cultivation of food crops. For example, Timeless Seeds only sells historic grains and legume seeds, which are good rotation crops to maintain soil.

Does a better diet help the environment? It depends. From a sustainability point of view, it is undoubtedly a correct idea to change the diet structure to more based on vegetable oils, or the health benefits associated with “elastic vegetarian” machines. Earlier this year, the Lancet Diet Committee released a report on the environmental impact of diet. Based on the analysis of scientific evidence, it concluded that consumers need to shift their diet from animals to plant proteins to help slow the increase in greenhouse gases (GHG). Many consumers’ reasons for buying organic food are health-related, and this approach is generally more conducive to protecting the environment and maintaining biodiversity. According to “National Geographic” (2018) It is reported that organic food sales in the United States have doubled in the past decade.

However, a paradox emerged. Although organic food is considered a healthier food source, Stanford University’s comprehensive review of 237 studies found that organic food is no healthier than conventionally grown food. It is not surprising that different interest groups have different opinions on the choice of organic food and non-organic food, which has led many consumers to be confused and distrustful of organic food.

Finding more sustainable farming methods to provide safe, rich, and nutritious food for the rapidly developing world is a challenge that can only be accomplished through scientific means. We need highly educated groups, especially millennials. Scientists need to reassure the public that for today’s agricultural machinery technology, the public need not worry at all, and ignoring these new products will cause problems for their health and living environment. For example, the next generation of seed technology will focus on healthy and functional foods.

The Australian National Science Institute (CSIRO) has developed a rapeseed that can produce high-quality vegetable oil rich in omega-3 fatty acids, similar to fish. Ignoring this technology may reduce the intake of omega-3 and maintain our dependence on fish resources and slow down the consumption of fish resources when 30% of the world’s fisheries are overfished.

Key insight: Consumers need to shift their diet from animals to plant proteins to help reduce greenhouse gas emissions.

4. Avoid disease. The World Health Organization (WHO) estimates that if the main risk factors for noncommunicable diseases are eliminated, such as an unhealthy diet, about 80% of premature heart disease cases, the incidence of stroke and type 2 diabetes, and 40% of Cancer can be avoided.

5. Zero hunger. By 2050, grain output is expected to increase by 50% to meet the needs of nearly 10 billion people on the planet. About 820 million people are chronically malnourished.

6. Healthy and happy. Health starts with nutrition. A report from the Lancet Commission (2019) estimates that unhealthy diets worldwide cause up to one-fifth of premature deaths each year.

Trend Four: Digital Improvement

We believe that food and agriculture are at the cusp of the digital revolution. Just recently, in 2018, food productionThe bottom of the technology adoption level-the digital penetration rate of agriculture is 0.3%, while the financial industry is 2.5%, and the retail industry is close to 12%. But today, it has attracted great interest from investors who realize the clear and urgent need to bring agriculture into the future. In 2018, investment in agriculture-related technologies reached US $ 16.9 billion, a 43% increase from 2017. Even celebrities like Jeff Bezos and Bill Gates have joined the game, investing in and promoting sustainable solutions for agriculture.

People often observe that the improvement in computing power is largely synchronized with Moore ’s Law. Moore’s Law states that the transistors on a chip will double every year for several years, and the cost will be halved. The declining cost of advanced technology means that the world around us is becoming closer. According to data from the World Economic Forum, only 500 million devices were connected to the Internet in 2005, but now there are 8 billion. By 2030, it is expected to exceed 1 trillion. In fact, shortly after the so-called third platform technologies (mobile, cloud, big data / analysis, and social technologies) became part of our lives, innovation accelerators, or machine learning, the Internet of Things, or so-called fourth platform technologies Robots, 3D printing, next-generation security technology, personalization, etc. are coming soon.

In the rapidly expanding digital market, they have become a key growth driver for many companies. Technology is everywhere in our lives, it redefines the meaning of everyday English. “Cloud” now refers to the computing data provided through the network; “tablet” refers to the smart device used for browsing; “stream” refers to playing videos on the Internet. The rapid pace of innovation has led the World Economic Forum to announce the start of the fourth industrial revolution in 2016. This is a conceptual revolution for the integration of physics, digital and biotechnology, or “Agriculture 4.0” for food production. More importantly, the impact of decentralized innovation and the widespread use of digital technology is essentially more fundamental and thorough than we thought. As data creation and mobile phones become easier, the value of data becomes more and more important.

What is needed now is a platform that unifies these different technologies into something intuitive that can afford all farmers. Of course, the demand for talent is also not small, to unlock the insights hidden in the data center. Knowledge-intensive food production tools, such as environmental sensors, mobile computing, satellites and imaging, drones, wireless communications, and even genetics, need to attract talent who can use data. In addition, labor-saving technologies, such as robotics, may reduce the number of people employed in traditional jobs, which makes it critical for the industry to develop countermeasures to deal with the side effects of automation.

Key insight: Just in 2018, food production ranked at the bottom in terms of the adoption of digital technology-the digital penetration rate of agriculture is only 0.3%, The financial industry is 2.5%, the retail industry is close to 12%. Industry, innovation and infrastructure. FAO invests in transportation, storage, irrigation and communication technologies to promote the sustainable development of rural communities.

Trend Five: Sustainable Living

Convergence trends have pushed food and agriculture to the forefront of the sustainable living agenda. Governments around the world are paying more and more attention to the 17 sustainable development goals of the United Nations and the Paris Climate Change Agreement. This clearly shows that society needs to transform itself into a low-carbon economy, which will require everyone to improve energy efficiency and who uses it, and reduce waste.

For example, renewable agriculture has the potential to absorb and store carbon dioxide from the atmosphere. This not only organized the industry’s impact on the environment, but also allowed it to develop well. As more and more people and emerging wealth continue to stimulate the demand for consumer goods, natural restrictions will become more and more obvious. In general, the international community needs to concentrate on working together to achieve a food-centric circular economy.

Another goal is to build an inclusive food production system that will not allow small landowners, women and youth to fall behind, minimize the impact on the environment, protect natural resources, and enhance the community ’s ability to withstand supply-side shocks. We have no doubt about the impact of climate change. Restrictions on resource shortages will significantly affect policy makers ’policies in the coming years, residents will force the authorities to purify the air, food producers will reduce greenhouse gas emissions, rebuild biodiversity, and reduce waste. Similarly, influence will replace profits as the core value of food companies. Many innovative companies are researching new technologies to improve the efficiency of food production.

According to the World Economic Forum, purposeful profit will become the norm. Unilever is a good example of how large enterprise groups may soon develop goal-oriented strategies for their core businesses. Paul Polman, the company’s outgoing CEO, was one of the first business leaders to give the word “sustainability” a newer, deeper meaning. He believes that this is not only a correct thing, but also an important part of economic growth.

We see that many companies have gone beyond compliance. According to KPMG data, nearly 90% of large companies around the world are using the indicators established by the Global Reporting Initiative (GRI) established in October 2016 to report on their sustainability performance. Although the participation of governments of various countries varies, they are also looking for policy intervention to achieve green development of the food industry.

KeyInsight: Sustainability is a key challenge facing the food system. Low-carbon economy and climate change have become the frontier issues of concern to the agricultural and food industries.

7. Sustainable cities and communities. By 2030, two-thirds of the world ’s population will be urban residents, and Asia will have half of the world ’s urban residents. Rapid urban development has placed greater demands on food demand.

8. The role of climate. Food production may be the biggest victim of climate change, but sustainable agriculture can be one of the solutions. Food production accounts for about 30% of the greenhouse gases produced by humans.

9. Underwater life. Fish account for 17% of all meat protein intake. According to the UN Food and Agriculture Organization, more than 30% of the world ’s fish resources are overfished.

10. Life on land. Agriculture is the most important factor in deforestation (about 80%) and biodiversity reduction. According to the Food and Agriculture Organization of the United Nations, 25% of the world ’s farmland has degraded, and different aspects of food production have led to this process.

11. Establish partnerships to achieve goals. It needs a coalition of investors, entrepreneurs, growers and governments, including traditional and non-traditional, to meet future challenges. According to the Business and Sustainable Development Alliance (2016), these partnerships may be worth US $ 2.3 trillion annually by 2030.